The Owner Dependency Trap

Yeah, that'll be a different episode. We should. We should actually crush it in AI.

Just the capabilities and how it's going to affect finance and marketing. Marketing's already under the cosh. But yeah, back to bottlenecks.

Let's discuss it bluntly. Why being the decision maker and the person that every single decision has to run through such a bad thing? Well, Jon, everyone, every operator that I know that has come through this, whether they're in the treadmill or the pathfinder stage, is that they think they're indispensable. And it sounds like a compliment to them, but it's actually the diagnosis of what's going on in their business.

They haven't built a business. When everything goes through you, you haven't built a business. You've built a high paying, high stress job and you can't sell it because we're calling it owner dependency.

But this is exactly what the bottleneck is. You can't step away from it. Not even for three seconds or going to your kid's little league game or dance recital or whatever that's going to be because you're constantly on the phone because only you can answer those questions.

Only you have that knowledge to, to, to help everybody out. And you can't scale because you can't clone yourself. Right? So the introduction is exactly what we're talking about.

And then, you know, the thing is, is that people think that being in control and doing everything is the way that they're going to get unstuck, but it's, but that's the exact thing that's keeping you stuck. Right? So I think everybody needs to take a, what we call the snowplow test, right? If you're gone tomorrow, does your business survive a week, a month or an afternoon? And it's the snowplow test because if you get hit by one, right? That's right. How long do you survive out of the coma? Yeah.

Right. I think owners push back on what you've just said a lot because I think they feel their business is different. And I mean, that was a pretty sweeping statement.

You cannot grow. You're, the more you try and control, the worse it actually gets because you're doing more things. So it seems counterintuitive, but yeah, owners would push back and say, my business is different.

I really do have to approve everything. It's the only way we can grow. How do you respond to it? You know, John, whenever we talk to owners, right? They all say that my business is different, right? Yes.

You are unique. You're, you're maybe the, where you are in the, in the world is a little bit unique, but you're still part of the same industry. So, you know, I hear my business is different from landscapers, caterers, lawyers, builders, manufacturers, HVAC guys, plumbing and heating, electricians, dentists, right? You're not different in a lot of respects.

You may be 1% different, right? In terms of how, how you manage your company or the name on your, the truck is different from the other person, right? That that's the thing. Your business isn't different. Your ego is right.

What's actually happening when you say that is you haven't documented the decisions. You haven't built a system. You haven't trained your team, right? All of that is fixable.

But what you're doing when you're saying I'm different is that you're dodging it. You're dodging the things that need to happen for you to scale. So it's not that your team can't make a decision.

It's that you haven't given them what they, what they need to make it, right? And that's a, that's a system. That's a process. That's, that's going over and saying, it's okay to make a mistake.

This is where you went wrong. Now, now it's a teachable moment, right? And so you don't allow them to make the same mistake twice, right? That's how you learned, right? You made a mistake, you fixed it, you figured it out. And then you, off you go.

And then when you see something, say, Oh, you guys made a mistake here because you know, I did that 15 years ago, right? I did that three months ago, right? So you have to train them to do that. I mean, my business is different is the adult version of my dog ate the homework. But guess what? Maybe once the dog actually did it.

And that's because, you know, I didn't like the assignment. I put peanut butter on it and said, go to town Fido. So many, so many ways I could, I could react to that comment.

And I'm going to react with the next question. Yeah, you react that way based upon experience, John, and we just went over that. I have never peanut buttered my homework.

Just, just to be clear. I'm going to have to donate to the local humane society. I found a different excuse.

There's a piece of the puzzle here that we call the vine audit, right? Done this with clients before. Walk people through it. How does it work? Why does it work? Why is it the first step here? So I think you take pen to paper for five days, right? For five business days, you write down every decision you made, every approval, every, Hey, I got a quick question, you know, and then you any, you know, slack paying texts, anything like that, write them down.

And by Friday, you'll have three whiteboards of stuff that has no business being on your desk, right? You filled it up. You filled up the entire legal pad by, by Tuesday afternoon. And so what you need to do is you take those decisions and you put them in three buckets, delegate, automate, eliminate, right? About 20% of what hits your desk doesn't need a decision.

It just needs to die, right? You know, what are we going to have for lunch today, boss? Do you really need to make that decision or do you just delegate it, right? Or eliminate and say, everyone's going on a lunch diet today. I tried that with my wife on that one. I don't care anything.

Right. I got eliminated. Yes.

Yeah, exactly. Exactly. I mean, in that case is like, well, just tell me what you want, right? You want to go to your favorite restaurant? Fantastic.

Let's just do that. 20 minute exercise. I tried to automate.

I didn't work either. Uber eats is arriving in 10 minutes. You'll like it.

It'll be fine. That's right. That's right.

So when you do that exercise, you're going to find that you're spending most of your time making decisions that do not bring your, your company forward, right? That other people with a process or a system could make those decisions. And it sometimes is literally, what are we going to have for lunch boss? Do you really need to make that decision? Right. There's a lot of other things.

You're going to miss it. Your kids literally game or parent teacher conference to decide what you're going to have for lunch, or if you should move an outlet three inches, right? Like seriously, why don't you've got to empower your folks here? You've got to trust them in order to build trust. What needs to happen? They need to demonstrate to you that they can do something, but you've got to give them the tools to be able to demonstrate it for them.

Do you want order takers or order makers in your business, right? If you have people running the job, you can't go second guess them in front of the crew, right? That's a private conversation or that you have, or how about this? You actually make the decisions together before you actually have them execute the order, execute the decisions and your problem. What do you think we should do here? Well, I think we should do X, Y, and Z. That's a, that's a really great call. But what you don't know is X, Y, you know, ABC.

Okay. Let's go over that now. Okay.

Now what should we do? Right. It becomes a learning. It becomes teachable and you start duplicating yourself in the decisions that they can make.

Well, that if they get that wrong, that's going to cost me a thousand dollars. Great. Right.

Let's not let them get that wrong by pre-planning, by having those conversations ahead of time. Educate them. Educate, train them, verify, trust, et cetera.

That makes the delegation process a little less scary because it comes down to fear. Like, hey, I've felt it. You feel it all the time.

I can't delegate that. I need, it needs to, we need to get it right. I need to build that because it's gotta be, it's gotta be bang on.

Right. So fear is, is an awful lot of the reason why people don't delegate. This episode is brought to you by Twins Plumbing and Heating out of the Manchester, New Hampshire area.

Hold on. Wait. What? Plumbing? Yes.

You? Yes. The guy who has said the word plumbing approximately 4,000 times on this podcast has a plumbing sponsor? It was inevitable. It was a cry for help is what it was.

Profit first isn't a philosophy. It's plumbing. Cashflow is plumbing.

The business is plumbing. Um, Ryan, have you personally ever fixed a pipe? I have hired people who fix pipes. That's exactly what I thought.

Which is exactly the point. Twins Plumbing and Heating does the actual work. Plumbing, heating, the things that keep a house from becoming a science experiment.

Manchester, New Hampshire and surrounding area, twinsph.com. So they do what you talk about. They do what I metaphor about. That's not a verb.

It is now. What's underneath it? What's underneath that fear? Well, I think there's three fears, right? Fear one is that they'll do it wrong and true. Sometimes that will happen, right? But that's what we call learning.

Nobody, you didn't ace every single exam in school, right? You didn't get hundreds, you didn't get A's, you didn't go that stuff. You made mistakes, you learned from them, right? And then you carried on. And that's what needs to happen here is that everything needs to be a teachable moment.

It's not a yell fest. It's why didn't you do that? It's okay, we're here. Now, how do we get out of it? How do we avoid this in the future, right? And how do we move on? Or better yet, hey, you're going to come up to a roadblock here pretty soon.

So why don't we talk about how we navigate that? Imagine that, right? Being proactive instead of reactive. And that's part of where learning takes you is that if I can start seeing the roadblocks ahead, instead of what happened and how I'm going to dig myself out of a ditch, that's all part of gaining knowledge, right? Second one is if they can do it, what am I here for? Really? You're here to turn a screw for your company? Or are you out there to get the next profitable job? Are you there to cultivate a relationship, right? Nothing is stopping you from going on the job site or from pulling a tooth or anything like that. But you've got to go out there and get more clients.

We've got a friend of mine who has not read my book, who has not taken a lot of my advice, who needs to do it himself, needs to go on the sites, do everything, is running out of work, right? For the first time since he opened up shop, he's starting to run out of work. And so now he has to go find it and he doesn't know how to do it because he's so used to answering the phone, taking the job, and then turning the screws. You can't do both.

Eventually you run out of runway, right? And so that's now his new job is it's no longer being an electrician, right? It's being the CEO of his company, right? And that's different skill sets, right? That's a different thing to do. But if he can empower his people to do the jobs, he can go out and find more jobs. And the number of people we talk to who are interested in selling their business and they haven't realized this, they haven't got through this, that they're end-to-end on every piece of work and how they don't realize how that devalues their business.

Because the more entrenched you are in the business, the less sellable it is. Because you're selling a job, you're not selling a piece of business to somebody else who wants to just take over and own. So I think we talked about that a little bit in the last episode.

I don't know which episode it was, but we did when we talked about buying and selling. So that's a key component of this. It's a necessary step that you've got to empower your team because it creates more value for your business as well.

You're absolutely right. It happens occasionally. Sometimes.

100 monkeys in a typewriter, man. A sentence will come out at some point in time. I listen to you.

Right. I was going to say a broken clock is right twice a day, but close enough. No, that's more often than me.

I'll go with the monkeys in a typewriter analogy because a little bit less frequent. That was fear number two. What's fear number three? Control.

John, I see it all the time. My way is the right way. This is the way we've always done it.

And that's the problem now. You're going to have a huge awakening in the next 6, 12, 18 months when AI becomes a tool, a new thing out there that's unavoidable. And these new people who can get on top of it, of AI or the new technology or the new way of doing things when they're going through their schooling, right? There's, there's, Hey, we used to do it this way.

Now we do it this way. And we found that it's more efficient. It's safer.

It's dah, dah, dah, dah, dah. Well, we're not doing it that way. Cause I've been doing this for the last 15 years.

And that's the way it's going to go. Right. In order to give up control, you have to have the trust, but also you have to understand that your way is not necessarily the right way.

And that's the thing. And that's what empowers the people. So when, when someone shows you a new way to do it, that might be a better way.

That's the day that the, the, the student has become the teacher. And that's what should be a matter of pride. Not well, uh, this, this industry is bypassing me right now.

Go with it, go with the new techniques, do those things. And, and that's a problem with a lot of people because people who need to have control, generally speaking are not very good at reacting when, when their plans go to crap. Right.

I see it all the time. Like the first thing is, Oh my God, what, what's going on here? Right. I, I, I, I'm this it's crazy, right? You have to be proactive and reactive, right? And in order to do that, you have to be able to trust in the people around you that you're hiring to do a job, right? They are no longer order takers.

They are now order makers. And that means your hiring process needs to be bang on as well. And we talk a lot about that in the SOS synergy operating system, how the value value-based hires or making sure that, uh, the values of the organization exist in every single hire.

And you've defined those as super important because when you do that, when you let go of control and you have great people in the organization, you actually get surprised at how they can bring new ideas to the table. And it, it improves efficiency. It improves, um, execution as well, because you can just oversee it.

And some of their thoughts, uh, bring other ideas to the table. I've had it with my integrator for my organization. She stepped on board and just the level of organization and thought has, uh, just ramped up and she's young, very knowledgeable, um, experienced, and it's affected the organization for the positive just by really pushing that little bit of control of an area that I wasn't so great at.

So, um, I think you just have to be mindful and take those steps. Yep. And I think, John, more importantly is that if you're listening to this and you can't name which of the fears is controlling you, right? Which of the fears is holding you back? It's probably all three.

Yeah. Awesome. Um, okay.

We talk an awful lot about Pete in, uh, our stories. We talk, uh, it's, he's also a, a factor in 317 AM, your soon to be released book, which covers, uh, the roadmap here of how to organize businesses. Uh, and a lot of these concepts are all in that narrative.

Pete $13 million owner approving every single vendor in vendor invoice. Walk us through it. What happened there? How did we fix it? So, uh, one thing we should tell our listeners and viewers is that, uh, I changed the names, industries and amounts for, for clients.

So, uh, Pete happens to be an actual client, but this is not, uh, about Pete, right? I just like wanted to use the word, uh, his name, Pete, if he's listening. Right. So here you go.

Shout out to you, Pete. Uh, but this has nothing to do with you. Right? So P in the book, right? Uh, and this is synergy hat.

This is my playbook. Uh, my internal playbook here where it's, uh, three 17 AM is based upon in all the almost 30 years of experience, John, um, of doing this now I'm getting 53,000 pages. Yeah.

It's, it's a lot. It's like 150,000. Yeah.

That's crazy. It's, it's 150,000 words, 29 and a half years to read it. Yeah.

Yeah. Yeah. And it's like stereo instruction.

So, uh, if you want to be a part of synergy, uh, this is one of your things that you have to do is pretty much memorize this book. But, uh, so Pete ran a, we'll, we'll, we'll call it a $13 million winter services company. Right.

And you know, the employees called him the penguin, which was an affectionately, it was more, more like the Batman penguin. Right. And he's, you know, and if this is ringing true to you all, uh, then you could be the bottleneck, but you know, in that 5 AM, first one in there out at 9 PM, got to approve every invoice over $500.

You know, you got to review every quote over $10,000. You got to call every major client personally, uh, after storms and make sure that everybody's okay. You know, and his snowplow test answer is it won't last an afternoon.

Right. Quick break for our sponsor Twins Plumbing and Heating, Manchester, New Hampshire area. Great company.

Great team. You know what they've got that you don't? A van. A team that runs without the owner.

We just spent 30 minutes talking about owners who can't step away from their business. And I'm sitting here with the guy who personally edits every episode title before it goes live. That's a creative decision.

That's a bottleneck. Moving on. Twins Plumbing and Heating is the version of what you've been preaching for nine episodes.

Plumbing and Heating in the Manchester, New Hampshire area. The owner built the team. The team runs the jobs.

The owner gets to actually go home. They've achieved what I tell other people to do for a living, which is mildly awkward. I'm aware.

TwinsPH.com. Listen to the experts, then hire the people who actually do the thing. So what we did do is we delegated vendor management to Diana, his operations manager of eight years. Right.

And month one, she renegotiated the contract and saved $12,000. And this is a real life. This is from a real life.

Right. So names have changed, that kind of stuff. Right.

And, and Pete was thrilled because when you are trying to do everything, you can't do everything. Well, you can't see everything when someone can dedicate like Diana, you know, hours to go through the vendor contracts. They're going to find things that you can't, because you're just glossing over because you you're making the decision.

Next decision, next decision, next decision. You can't really dig deep into these things. You can't dig into the weeds.

Whereas Diana, right. That's, that's now her job. She's going to spend time to go through it and review it and make decisions and help renegotiate these things.

Right. Month two, you know, she switched de-icing vendors. So the new vendor missed deliveries on three job sites during the first December storm, it was a disaster.

So she decided I'm going to change vendors. We're not going to put up with that anymore. Right.

Now Pete's instinct was to take it back and say, listen, you're approving everything. I want to approve everything now because you know, the new vendor didn't work out. We had to switch, you know, after month two, things aren't going well.

But the fact of the matter is, is that she swung and she missed, she learned from it. And now that second vendor was better than Pete's original vendor. Right.

And that, and that was the whole reason to switch was because the original vendor was just as bad as the one she switched to originally. Right. And they, but they sat down during that process, they worked out an evaluation checklist, right.

I remember this and they sat down and worked out exactly how to select vendors going forward as well. So it wasn't just about that one new vendor relationship. Everything could snowball from that point onwards.

Right. You're absolutely right, John. Right.

And they, they made what we call a procedure, right? That's that operation vendor checklist now. And so that they use that for every single vendor that they do select. They also did, they do a semi-annual review on their vendors as well as how well their, their vendors are performing.

Right. So they're rating their performance, their vendors on performance now. And they're using that information to go in and renegotiate or negotiate with, with their vendors.

Right. And making sure that, that things are being done. So by Pete removing himself from these things and he, this was a ripple effect.

It wasn't just vendor management. Then he let someone else take over accounts receivable. Then he let, you know, his, his finance people help make decisions in his operations decisions.

Right. And we were having monthly, we were having weekly management meetings, monthly financial meetings. It was going through tax.

It was going through, you know, exit planning, success planning, the whole shebang. We, that was just one ripple effect of Pete letting go and letting go more and, and trusting his team. And eventually that $13 million company that was owner dependent sold for $10 million.

And use the Vine Audit on him, right? I think that. Absolutely. Yeah.

The Vine Audit was the first step. And then there was something else. There was another number that we use to track this, the Owner Dependency Index.

Tell us about this. So the Owner Dependency Index essentially is we take a one to 10 scale across about 10 functions, right? Sales, delivery, client relationships, hiring, cash decisions, vendor relationships, quality control, accountability, process knowledge, and where escalations land. Right.

And you need to have your team score you anonymously. Right. And most owners self score a four when the team would score them an eight.

Right. And, and usually the team is right. And so we want to make sure that, you know, a 10 means that the business collapses if you take a week off.

Right. So we've got a reverse scale. You want to be at one, not 10.

Yeah. Right. And so, right.

It's, it's exactly stuff. So if you, if you, if you've got a ton of impact, 10, you're, you're, you're wrecking things. Whereas if you have minimal impact, it's a one, you only get in the way a little bit, or you're at the right level.

Ideally that's the scale. And everyone hears about these folks who live in Aruba, who have a business in, you know, Kansas city, and they're running it from Aruba because their team is handling everything in Kansas city. And they just pop onto a meeting here and there, make sure that their business is running well.

And then they, they get to stay on the beach and drink pina coladas all day long. That's the owner dependency of one, right? That's what we're all shooting for. We're not shooting for the tents.

Right. And so buyers are paying for cashflow that continues after you leave. Right.

They want to buy businesses closer to a one than a 10. A 10 means that they're buying with overhead, right? They're, they're buying a job with stress. They're the ones that have to work 80 hours a week.

Why would I pay somebody a million dollars to make $150,000 a year cashflow and work 80 hours a week? Right. I could probably just get a W2 job to do that. Right.

And so if you're closer to a 10, a couple of things are going to happen in the buying process. They're going to walk because it looks pretty on the outside. But then when you look underneath the hood, right, it's all owner dependence.

It's the owners, the hamster on the wheel, turning the engine. Right. Two is they're going to low volume because it's a job with, with headaches and stress.

And three is they're going to build an earn out to change you to the desk for three more years, making sure that the relationships, everything that you've done, that you've cultivated, right. The processes that you haven't written down, right. Are going to be done in the next three years.

Right. And they're going to switch over to the new buyer because that's the only way they can do that. So, you know, in terms of walk, low ball, or have an earn out for a number of years, pick your favorite poison.

Yeah. Right. Because if you're the bottleneck, it's going to be one of those three.

And it's a huge swing, right? Like we know a difference in score.